One of the most notorious environmental disasters ever caused by a transnational corporation was the Marcopper mining disaster in December 1993, when parts of a dam owned by Marcopper Mining Corporation broke and spilled toxic waste into the Mogpog River in the Philippines. The resulting pollution posed serious health risks and destroyed critical sources of livelihood and properties of the local population. Although some of the damage had been remedied (and compensation provided to the victims) by a mutual memorandum agreement in 1994, at least thirty plaintiffs filed suit in 2001 in the Marinduque Regional Trial Court in the Philippines seeking additional compensation. After 21 years, in May 2022, the court made a landmark ruling against Marcopper Mining Corporation awarding additional compensation in the amount of 200,000 Philippine pesos (equal to merely $3,600 US dollars) and 100,000 Philippine pesos (equal to merely $1,800 US dollars) in “moral damages” to the plaintiffs.[1] Although the Marcopper mining disaster had international dimensions, it was a domestic problem as the Marcopper Mining Corporation was a Philippine company, despite being managed and 40% co-owned by a Canadian company named Placer Dome.[2]

Recognizing that victims of all disasters caused by businesses should have a prompt and effective remedy in future situations, the international community has for several years been considering a comprehensive international approach to such situations involving a binding international convention on business and human rights. A draft of the convention is being negotiated and amended in order to reach a compromise between states. The current title of the draft is “Legally Binding Instrument to Regulate, in International Human Rights Law, the Activities of Transnational Corporations and other Business Enterprises”. However, in this blog we will also refer to it as the “Draft of the Binding Treaty on Business and Human Rights”, and the “Draft Treaty”. This blog provides background, describes the content of the proposed treaty, and identifies major issues still to be resolved among states.

The scope of the treaty is broad, but with respect to claims against corporations based on alleged human rights violations, the major unresolved issues are: access to remedy, which includes broader jurisdiction for courts; reversal of the burden of proof; removal of the statute of limitations for human rights abuses in violation of international law; elimination of forum non-conveniens; the scope of application which include whether the treaty should apply only to companies of a transnational character or to all business entities; prevention of human rights violations under the treaty, and international cooperation between states.

I. BACKGROUND AND THE HISTORY OF THE PROPOSED “BINDING TREATY” ON BUSINESS AND HUMAN RIGHTS

Many human rights violations and environmental disasters caused by transnational companies have occurred in developing and underdeveloped countries. The United Nations Guiding Principles on Business and Human Rights of 2011 (adopted by the United Nations Human Rights Council)[3] offer a set of voluntary guidelines for states on protecting human rights, providing remedies to victims, imposing obligations upon business enterprises, and ensuring that business enterprises respect human rights. However, the UN Guiding Principles have not been effective in ensuring that victims in underdeveloped countries can obtain adequate compensation for the human rights violations they have suffered at the hands of transnational corporations.

Accordingly, in September 2013, at the United Nations Human Rights Council (UNHCR), the Republic of Ecuador with the support of other countries and over 90 NGOs[4], issued a statement calling for a legally binding international instrument to regulate the work of transnational corporations and ensure that the victims of human rights abuses related to the activities of international corporations can obtain appropriate compensation.[5]

In 2014, at the UNHCR’s initiative, the United Nations General Assembly established an open-ended intergovernmental working group (hereinafter “OEIGWG”) on transnational corporations and other business enterprises with respect to human rights under Resolution 26/9.[6] This group was charged with drafting an international legally binding instrument related to international human rights, the activities of transnational corporations, and other business enterprises.[7]

The initial document containing the elements for such an instrument was published in 2017, and it proposed mechanisms for the implementation of human rights including an “International Court on Transnational Corporations and Human Rights”.[8] However, that proposal did not find much support, and different implementation mechanisms were subsequently proposed.

Four drafts have been developed so far for this treaty.  The first draft (known as “Zero Draft”) was prepared in 2018 by the OEIGWG’s Chair Rapporteur[9] (along with a draft optional protocol).[10]  The Zero Draft did not include the creation of an international court as the mechanism for resolving claims but instead conferred jurisdiction upon national courts to resolve matters covered under the draft treaty.[11]

The Zero Draft also provided for the creation of a committee empowered to make comments on the understanding and implementation of the treaty by state parties, and would also provide support to member states in the compilation of information required for the implementation of the treaty. [12]

Following this draft, OEIGWG held a session in 2019, at which many delegations and organizations argued that the draft treaty’s scope should be much broader and that it should include all companies, not only transnational corporations.[13]

After considering reactions from states and business entities, the Chair Rapporteur prepared another version (called “the Revised Draft”) published in July 2019.[14] Based on the comments and proposals by states and organizations in the OEIGWG session held in early 2020, the Chair Rapporteur compiled yet another report and recommendations for the draft.[15]  A second revised draft was then published in August 2020,[16]  alongside another document explaining the key issues and the structure of the second revised draft.[17]  A third revised draft, which is also the latest draft (also referred to as the “Draft Treaty”) was published in August 2021, and it incorporates changes from the second revised draft in definitions, scope, access to remedy, legal liability, jurisdiction, the statute of limitations, mutual legal assistance and international judicial cooperation.[18]

The most recent meetings of the OEIGWG on transnational corporations and other business enterprises with respect to human rights were held on 24-28 October 2022 in which comments and proposals about the Draft Treaty were presented by UN countries. In addition, UN representatives, civil society organizations, national human rights institutions, intergovernmental organizations, business associations, employers’ organizations, and international experts also participated in these meetings.[19]

II. THE CONTENT OF THE LATEST DRAFT OF THE “BINDING TREATY” ON BUSINESS AND HUMAN RIGHTS

The overall purpose of the proposed “Draft Treaty” is to clarify the human rights obligations of transnational business enterprises, and to prevent and mitigate the occurrence of human rights abuses in the context of business activities by effective mechanisms of monitoring and enforceability.[20]

The proposed Draft Treaty would obligate state parties to take all appropriate legal and policy measures to ensure that business enterprises subject to their jurisdiction (including transnational corporations and other business enterprises that undertake activities of transnational character) respect all internationally recognized human rights and prevent and mitigate human rights abuses throughout their operations.[21]

The Draft Treaty sets forth requirements to be fulfilled by state parties, in order to ensure its implementation. State parties would be required to amend their legislation where appropriate, for it to be in accordance with the requirements and standards set by the Draft Treaty. This obligation would also include the establishment of adequate monitoring mechanisms to ensure effective implementation of the Draft Treaty.[22]

The scope of the Draft Treaty is very broad: it would apply to all business activities undertaken by a physical or legal person within a state, also including business activities of a transnational character.[23] However, it would permit state parties to establish in their domestic legislation a non-discriminatory basis to differentiate how business enterprises discharge these obligations commensurate with their size, sector, operational context or the severity of impacts on human rights.[24]

The main points of the Draft Treaty are (1) access to remedy for victims; (2) protection and prevention for victims, and 3) the establishment of a committee and international cooperation between states.

1. Access to remedy

The victims would have access to remedy for damages by bringing claims to courts of state parties that have jurisdiction. The jurisdiction would be conferred upon the courts of the state where: (i) the human rights abuse or omission contributing to the human rights abuse occurred and/or produced effects; (ii) the state where legal or natural persons alleged to have committed such act are domiciled; and (iii) the state where the victim is a national or where the victim is domiciled. This would not preclude the exercise of additional civil jurisdiction provided for by international treaties or domestic laws.[25] The aforementioned broader scope of jurisdiction may be controversial, as many states strongly prefer allowing corporations to be sued at their “seat” – wherever they are organized or “at home”.

Further, courts would have jurisdiction to adjudicate cases over claims against legal or natural persons not domiciled in the territory of the forum State, in the event that (i) no other effective forum guaranteeing a fair judicial process is available; and (ii) if there is a connection to the presence of the victim (as the plaintiff), assets of the business enterprise  (as the defendant), or substantial activity of the business enterprise (as the defendant) on the territory of the forum chosen.[26] The broad jurisdictional approach would enable victims to sue business enterprises and establish jurisdiction of courts wherever it would be more convenient for victims, and it would make it easier for victims to seek remedies against companies than it is now.

Moreover, the Draft Treaty would oblige state parties to enact or amend laws that would allow judges to reverse the burden of proof in appropriate cases and circumstances, in order to ease victims’ right to access remedy. Nevertheless, the cases and circumstances under which judges can reverse the burden of proof have not been specified in the Draft Treaty. The enactment and amendment of such laws would be mandatory for state parties, if they comply with their domestic constitutional law and international law.[27] The reversal of the burden of proof is a legal concept that places the burden of proving something from the plaintiff to the defendant. For example, in an environmental case, a judge may decide to shift the burden of proof from the plaintiff to the defendant, and then the defendant would have to prove that its actions did not cause the pollution.

There are international law practices where the reversal of burden of proof has been applied. Such is the Escazú Agreement, in which to guarantee the right of access to justice in environmental matters, state parties have agreed to take measures to facilitate the production of evidence of environmental damage by allowing the reversal of the burden of proof.[28]

The Draft Treaty would require state parties to adopt legislative or other measures necessary to ensure that statutory and other limitations do not apply for the commencement of legal proceedings in relation to international human rights violations, that constitute the most serious crimes of concern to the international community.[29] A statute of limitations is a legal provision that sets the maximum amount of time that a plaintiff has to initiate legal proceedings, before it loses the right to do so.[30]

The provision of the Draft Treaty that eliminates the statute of limitations, provides that victims must have the right to seek remedy for international human rights violations regardless of how much time has passed since the abuse occurred.

For civil claims or human rights violations that do not constitute the most serious crimes of concern to the international community as a whole, state parties shall adopt legislation to allow a reasonable period of time for the commencement of legal proceedings in relation to human rights abuses, particularly in cases where the abuses occurred in another state or when the harm may be identifiable only after a long period of time. [31]

The Draft Treaty aims to provide easier and more effective access to remedy, including the removal of the doctrine of forum non-conveniens. This doctrine is well-developed in the United States, where it gives courts discretionary power to decline the exercise of its jurisdiction when it deems that another court of another jurisdiction may be more convenient to hear the case.[32] One of the reasons as to why the Draft Treaty would eliminate this doctrine could be that some victims may have limited resources and may not be able to afford to pursue a case in a foreign court, while business entities as defendants may have better resources to litigate in multiple jurisdictions.  Although the purpose of this provision is to make it easier for victims to seek a remedy, it may face challenges and 0pposition from common law countries, such as the United States.

Additionally, state parties would be required to ensure that their court fees and legal cost rules do not place an unreasonable burden on victims, and state parties would be required to provide rules for waiving certain costs in appropriate cases.[33]

The Draft Treaty provides that state parties shall meet regularly in a “Conference of State Parties” to consider any matter regarding the implementation of the Draft Treaty, and to discuss any further development needed towards fulfilling its purposes.[34]

The Draft Treaty would also require the establishment of an International Fund for Victims which would provide legal and financial aid to victims in seeking access to remedies, with special consideration for additional barriers faced by vulnerable and marginalized groups.[35] State parties would be required to contribute to this fund, either alone or jointly, or in partnership with relevant international and regional organizations and civil society.[36] The Conference of State Parties would define and establish the functioning provisions of the fund.[37]

The Draft Treaty would require state parties to ensure that their domestic legislation provides for the legal liability for human rights abuses arising from the business activities of natural and legal persons.[38] It further provides that state parties’ domestic legislation should not require the establishment of criminal liability for the same acts before civil liability could be imposed.[39] Further, state parties would be required to also ensure that their domestic legislation provides for reparations to the victims of human rights violations, in accordance with international standards.[40]

The Draft Treaty provides for state parties to require natural or legal persons conducting business activities, including transnational corporations, to establish and maintain financial security such as insurance bonds or other financial guarantees, to cover potential claims of compensation.[41] The broad scope of this provision may be difficult to enforce in all state parties, as it would require every business entity operating in every state party to the treaty to have financial guarantees to cover potential claims of compensation. This would also apply to small businesses unless state parties intentionally remove this burden from small businesses pursuant to Article 3.2. of the proposed Draft Treaty.

2. Protection and prevention for victims

According to the Draft Treaty, immediate family members or dependents of the direct victim may be considered victims.[42] The treaty has provided for the protection of victims by imposing obligations upon state parties to ensure that victims and their families are not subject to any unlawful interference with their human rights and fundamental freedoms, either prior to or after the commencement of proceedings against a business entity. In addition, state parties would be required to protect victims from re-victimization in the course of proceedings initiated at national courts for violations under this Draft Treaty.[43] Further, state parties would be obliged to investigate all human rights abuses covered under the Draft Treaty and take action against natural or legal persons where appropriate.[44]

The best protection is prevention, and the Draft Treaty provides for state parties to enact proper legislation and policies, to ensure that all business entities subject to their jurisdiction comply with human rights and mitigate human rights abuses in their business activities and relationships. Particularly, state parties would be obliged to add a due diligence requirement upon business entities subject to their jurisdictions in the following matters: (i) to take appropriate measures to prevent and mitigate potential human rights abuses which the business entity causes or contributes to through its business activity; (ii) to monitor the effectiveness of their measures to prevent human rights abuses; (iii) to communicate regularly and in an accessible manner to affected or potentially affected people.

Further, state parties would be required to ensure that the measures of business entities subject to their jurisdiction would include: (i) publishing regular human rights, labor rights, environment, and climate impact assessments; (ii) conducting consultations with individuals or communities whose human rights can potentially be affected by business activities; and (iii) integrating human rights due diligence requirements in their contracts.[45]

According to the Draft Treaty, the obligations imposed by state parties upon business enterprises subject to their jurisdiction could have different requirements depending on the size, nature, sector, location, operational context, and risks associated with the business activities.[46]

3. The Committee and international cooperation

To oversee the operation of the Draft Treaty, a committee would be established, consisting of 12 experts at the time of entry into force of the treaty, and after an additional sixty ratifications, this number would be increased to 18 experts. The experts would be elected by state parties, based on equitable geographical distribution, and differences among legal systems.[47]

State parties would be required to submit reports to this committee on the measures they have taken to give effect to their undertakings under the Draft Treaty. The Committee would be authorized/required to provide concluding observations and recommendations on these reports submitted by state parties. It would also have the power to make normative recommendations on the implementation of the treaty, provide recommendations on reports by state parties, and provide support to state parties for the compilation of such reports.[48] This committee would also be required to provide support to the State Parties in the compilation and communication of information required for the implementation of the Draft Treaty.

Disputes between states party to the treaty (about their compliance with its provisions) would be resolved by the International Court of Justice or arbitration in accordance with the procedures and organization mutually agreed by those states.[49]

The Draft Treaty would be open for signature by all States and by regional integration organizations at United Nations Headquarters in New York and would be applicable to those states only.[50]

III. OTHER CONCURRENT DEVELOPMENTS

Concurrently, there have been some interesting developments in European Union’s legislation, as the European Commission has proposed a new Directive on Corporate Sustainability Due Diligence. On November 30, 2022, the Council of the European Union adopted its negotiating position (‘general approach’) on the corporate sustainability due diligence directive.[51] The purpose of the directive is to help the European Union transition more effectively toward a green economy as provided in the European Green Deal and the United Nations Sustainable Development goals.[52] The European Union could formally and ambitiously enter the negotiations, especially now that a European Union Directive proposal on corporate sustainability due diligence is being negotiated.[53]

There is a major movement of businesses in the United Kingdom urging the United Kingdom Government to develop, implement, and enforce a Business, Human Rights, and Environment Act, which would mandate companies to carry out human rights and environmental due diligence across their own operations and value chains.[54] Hence, it is reasonable to believe that the UK is going to implement legislation to further address ESG issues, including showing support for the proposed treaty.

CONCLUSION

The Third Revised Draft has added some clarity in comparison to its prior drafts and has created a clearer picture as to how the final version of the Draft Treaty is going to be like. The rapid global development of environmental, social, and corporate governance is widespread in developed countries’ legislation, and the Draft Treaty needs to be a catalyzer of further development in all countries. The improvements throughout drafts of this treaty have become more sophisticated and acceptable among states. The main challenge that the Draft Treaty faces is a political obstacle, as its implementation is dependent on state parties.  The Draft Treaty needs to fill regulatory gaps left by the Guiding Principles of the United Nations with respect to Business and Human Rights (2011), and countries’ national legislation, by setting clear and concise obligations upon countries. The Draft Treaty must set the basis for the harmonization of legislations of United Nations countries, in relation to business entities and transnational corporations’ compliance obligations. After the meetings held on 24-28 October 2022, states have submitted proposals to the draft, and it is expected that the Chair-Rapporteur will include the states’ proposals in a new draft, and then new rounds of meetings, discussions, and negotiations will follow.

[1] “In historic decision, court awards damages to Marcopper survivors”, the Legal Rights and Natural Resources Center in the Philippines, May 23, 2022. See: https://www.lrcksk.org/post/in-historic-decision-court-awards-damages-to-marcopper-survivors (Last visited Mar. 7, 2023).

[2] Coumans Catherine, Canadian transnational dumps waste responsibility in Marinduque, Philippine Center for Investigative Journalism, March 24, 1999. See: https://old.pcij.org/stories/canadian-transnational-dumps-waste-responsibility-in-marinduque/ (Last visited Mar. 7, 2023).

[3] Guiding Principles on Business and Human Rights (2011), the United Nations Human Rights Council, see: https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf (Last visited Mar. 7, 2023).

[4] Supported by the African Group, the Arab Group, Pakistan, Sri Lanka, Kyrgyzstan, Cuba, Nicaragua, Bolivia, Venezuela, and Peru.

[5] Statement on behalf of a Group of Countries at the 24rd Session of the Human Rights Council, September 2013, see: https://media.business-humanrights.org/media/documents/files/media/documents/statement-unhrc-legally-binding.pdf  (Last visited Mar. 7, 2023).

[6] The United Nations General Assembly Resolution 26/9, July 14, 2014, see: https://daccess-ods.un.org/tmp/8158466.81594849.html (Last visited Mar. 7, 2023).

[7] ibid,

[8] Elements for the draft legally binding instrument on transnational corporations and other business enterprises with respect to human rights, Chairmanship of the OEIGWG established by HRC Res.a/HRC/RES/26/9, September 29, 2017, see: https://www.ohchr.org/sites/default/files/Documents/HRBodies/HRCouncil/WGTransCorp/Session3/LegallyBindingInstrumentTNCs_OBEs.pdf  (Last visited Mar. 7, 2023).

[9] Legally Binding Instrument to Regulate, in International Human Rights Law, the Activities of Transnational Corporations and Other Business Enterprises – Zero Draft, July 16, 2018, see: https://www.ohchr.org/sites/default/files/Documents/HRBodies/HRCouncil/WGTransCorp/Session3/DraftLBI.pdf  (Last visited Mar. 7, 2023).

[10] Draft optional protocol to the legally binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises, see: https://www.ohchr.org/sites/default/files/Documents/HRBodies/HRCouncil/WGTransCorp/Session4/ZeroDraftOPLegally.pdf  (Last visited Mar. 7, 2023).

[11] Legally Binding Instrument to Regulate, in International Human Rights Law, the Activities of Transnational Corporations and Other Business Enterprises – Zero Draft, July 16, 2018, Articles 8, and 9.

[12] ibid, Article 14.

[13] Report on the fourth session of the open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, January 2, 2019. See: https://undocs.org/A/HRC/40/48  (Last visited Mar. 7, 2023).

[14] OEIGWG on transnational corporations and other business enterprises with respect to human rights, Chairmanship Revised Draft, July 16, 2019, see: https://www.ohchr.org/Documents/HRBodies/HRCouncil/WGTransCorp/OEIGWG_RevisedDraft_LBI.pdf  (Last visited Mar. 7, 2023).

[15] Report on the fifth session of the open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, January 9, 2020. See: https://undocs.org/A/HRC/43/55  (Last visited Mar. 7, 2023)

[16] OEIGWG on transnational corporations and other business enterprises with respect to human rights, Chairmanship Second Revised Draft, June 8, 2020. See: https://www.ohchr.org/sites/default/files/Documents/HRBodies/HRCouncil/WGTransCorp/Session6/OEIGWG_Chair-Rapporteur_second_revised_draft_LBI_on_TNCs_and_OBEs_with_respect_to_Human_Rights.pdf (Last visited Mar. 7, 2023)

[17] Key issues and structure of the second revised draft, Recommendations of the Chair Rapporteur, paragraph (g), 5th session. See: https://www.ohchr.org/sites/default/files/Documents/HRBodies/HRCouncil/WGTransCorp/Session6/igwg-key-issues-2nd-revised-draft.pdf  (Last visited Mar. 7, 2023)

[18] OEIGWG on transnational corporations and other business enterprises with respect to human rights, Chairmanship Third Revised Draft, August 17, 2021. See: https://www.ohchr.org/sites/default/files/LBI3rdDRAFT.pdf  (Last visited Mar. 7, 2023)

[19] Draft report on the eighth session of the open-ended intergovernmental working group on transnational corporations and other business enterprises with respect to human rights, October 28, 2022. See: https://www.ohchr.org/sites/default/files/documents/hrbodies/hrcouncil/igwg/session8/2022-10-28/igwg-8th-draft-report.pdf  (Last visited Mar. 7, 2023)

[20] Draft Treaty, supra footnote 18, Article 2.1., subparagraphs b) and c).

[21] ibid, Article 6.2.

[22] ibid, Article 16.

[23] ibid, Article 1.3., and Article 3.1.

[24] ibid, Article 3.2.

[25] ibid, Article 9.1.

[26] ibid, Article 9.5.

[27] ibid, Articles 7.4. and 7.5.

[28] Regional Agreement on Access to Information, Public Participation and Justice in Environmental Matters in Latin America and the Caribbean of 2018, Article 8.3.(e).

See: https://repositorio.cepal.org/bitstream/handle/11362/43583/1/S1800428_en.pdf (Last visited March 5, 2023)

[29] Draft Treaty, supra footnote 18, Article 10.1.

[30] Majaski, Christina, Statute of Limitations: Definition, Types, and Example, 22 November 2022. See: https://www.investopedia.com/terms/s/statute-of-limitations.asp

[31] Draft Treaty, supra footnote 18, Article 10.2.

[32] Brand, Ronald A., and Scott R. Jablonski, ‘Common Law Forum Non Conveniens: Four Countries, Four Approaches’, Forum Non Conveniens: History, Global Practice, and Future under the Hague Convention on Choice of Court Agreements, p. 1, (1st ed. 2007).

[33] Draft Treaty, supra footnote 18, Article 7.4.

[34] ibid, Article 15.5.

[35] As defined in Article 15.7. of the Binding Treaty, these groups will include: Women, children, persons with disabilities, Indigenous peoples, migrants, refugees, internally displaced persons, and other vulnerable or marginalized persons or groups in seeking access to remedies.

[36] Draft Treaty, supra footnote 18, Article 13.2.(e).

[37] ibid, Article 15.7.

[38] ibid, Article 8.1.

[39] ibid, Article 8.2.

[40] ibid, Article 8.4.

[41] ibid, Article 5.

[42] ibid, Article 1.1.

[43] ibid, Article 5.1.

[44] ibid, Article 5.3.

[45] ibid, Article 6.4.

[46] ibid, Article 6.6.

[47] ibid, Article 15.1.

[48] Draft Treaty, supra footnote 18, Article 15.4.

[49] ibid, Article 18.2.

[50] ibid, Article 19.1.

[51]  Proposal for a Directive of the European Parliament and of the Council on Corporate Sustainability Due Diligence and amending Directive (EU) 2019/1937  –  General Approach, see: https://data.consilium.europa.eu/doc/document/ST-15024-2022-REV-1/en/pdf (Last visited Mar. 7, 2023)

[52] The Council of the EU press release: Council adopts position on due diligence rules for large companies, December 1, 2022, see: https://www.consilium.europa.eu/en/press/press-releases/2022/12/01/council-adopts-position-on-due-diligence-rules-for-large-companies/ (Last visited Mar. 7, 2023).

[53] Business and human rights treaty: Clean up the mess article, Business & Human Rights Resource Center, October 28, 2022, see: https://www.business-humanrights.org/en/latest-news/business-and-human-rights-treaty-clean-up-the-mess/ (Last visited Mar. 7, 2023).

[54] Investor Letter for UK Human Rights Due Diligence, Business & Human Rights Resource Centre, August 31, 2022, see: https://www.business-humanrights.org/en/latest-news/investor-letter-for-uk-human-rights-due-diligence/ (Last visited Mar. 7, 2023).